Ask TaxTim

I am a South African citizen residing in South Africa and work from home on the Internet. My company is registered offshore in the Seychells and have an offshore bank account in Mauritius. I have no clients in South Africa or Africa, but work with clients in other countries and have mandates with companies in the USA, Moscow and Hong Kong. I stand a good chance to earn a substantial commission which will be paid into my offshore account. Can I opt to pay taxes in Mauritius as i also want to purchase a property in Mauritius.

International tax planning is a very complicated area of tax and needs to be planned very carefully as the tax law is very harsh. The basic principle affecting all South African resident taxpayers is that income earned from anywhere around the world is taxed in South Africa. If taxes are paid in another country on that income then those taxes are offset against any taxes due in South Africa. Now there are a few exceptions and different thresholds that need to be met, but essentially income is earned where the service is performed and therefore tax is paid in that country.

Your company is registered in the Seychelles so in theory that is where the taxes will be paid, regardless of whether or not the bank account is located. However as no taxes are paid on Seychelles International Business Corporations the South African tax law is quite clear on who would pay taxes. In the case of an individual the income of the company (essentially the company would be invoicing for the services I'm assuming) would actually be seen to be your income and therefore taxed in your hands personally at your marginal rate of tax. Do you perform all the work in South Africa, what is the exact nature of your work?

Regarding the bank account, you can make application to the Reserve Bank to have the money kept in Mauritius after all taxes have been paid and purchase a property. South African residents are allowed to take up to R5m out of the country each year and in the case of purchasing property can actually take more.

Get SARS Tax Dates and Deadlines in your Inbox

We'll tell you when you need to file, along with tax tips and updates.